Centre asks Telangana to directly raise loan for Hyderabad Metro Phase-I takeover

On Wednesday, the Union Ministry of Housing and Urban Affairs (MoHUA) requested the Telangana government to directly raise and service the proposed loan for taking over Hyderabad Metro Rail (HMR) Phase-I. Instead of routing the loan through the special purpose vehicle, Hyderabad Metro Rail Limited (HMRL), the Centre wants the state government to handle the debt directly as a key prerequisite to establishing a 50:50 joint venture for the HMR Phase-II project in Hyderabad.

Union Ministers Ashwini Vaishnaw, Manohar Lal Khattar, and G. Kishan Reddy have urged Telangana Chief Minister A. Revanth Reddy to adopt this model. The proposal is based on the Jaipur Metro model, where the Rajasthan government executed the first phase of 11 kilometres through a wholly state-owned entity, while the second phase of 41 kilometres was managed by a 50:50 joint venture with the Centre.

Under this model, once the initial phase is cleared of all debts and liabilities, the entities would merge into a single joint venture owned equally by the state and central governments.

For Hyderabad Metro Phase-II, the proposed 50:50 joint venture would see 48 percent of the project cost funded through loans. The Telangana government would bear 30 percent of the cost, the Centre would contribute 18 percent, and the remaining 4 percent would come through public-private partnerships for minor works.

This direct loan takeover approach is expected to help free HMR Phase-I from its debt repayment obligations, avoiding a stalled Rs 13,527 crore loan from the Indian Railway Finance Corporation. The state government plans to identify a suitable agency, with assistance from SBI Caps, to fund the takeover of Phase-I from L&T at a lower interest rate.

The chosen agency will assess the valuation of Phase-I and the financial aspects of Phase-II. Officials believe a higher valuation of Phase-I and the Centre's equal partnership in the new joint venture will make it easier to secure concessional funding from financial institutions. However, this arrangement will also give the Centre a greater role in Hyderabad Metro affairs, including decision-making and key official appointments.